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Thursday, July 07, 2016 Derek Macpherson

Island Deep Drill Results Support Richmont’s Current Valuation


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Richmont Mines Inc.(TSX:RIC, NYSE MKT:RIC) released final results from the Phase 1 drill program and updated plans for the Phase 2 program at the Island Gold Mine. Results were highlighted by 6.6 m at 18.63 g/t Au (MH1-6) and 2.27 m at 17.41 g/t Au (620-543-34). Phase 1 was the first step in extending the mine life above the 1,000 m level and the goal of Phase 2 is to expand the existing resource both laterally and at depth. The reported results are beneficial for planned production above the 1,000 m level but imply a shaft may be justified to access deeper resources.

 

Phase 1 results suggest both resource continuity and the potential for expansion. Phase 1 (Figure 1) began in September 2015 and had the objective to test the lateral and depth extents of the existing deposit and other high priority targets. Approximately 50,100 m of lateral drilling was completed and was highlighted by 2.27 m at 17.41 g/t (620-543-34), 2.78 m at 21 g/t (620-556-04), 2.46 m at 10.55 g/t (GD-590-05) suggesting a potential resource area east of the main deposit. Approximately 21,700 m of deep directional drilling was completed, highlighted by 6.6 m at 18.63 g/t (MH1-6), 4.12 m at 9.11 g/t (MH1-7), 2.19 m at 12.49 g/t (MH3-6) and 5.84 m at 6.36 g/t (MH4-1) confirming the down plunge extension of the deposit. Deep drilling has also identified a high-grade resource block to the east of the main deposit plunge. 


Phase 1 success, justifies continued exploration. Phase 2 is planned be completed over the next 18 to 24 months and should include approximately 142,000 m of drilling. The objective is to expand the resource to the east zone, identified in Phase 1, and to identify the next million or more ounces resource between the 1,000 and 1,500 m levels. Regional drilling is planned to be continued in Phase 2, exploring previously identified gold targets on the 77 square kilometer Island Gold property.

The reported results are beneficial to the planned development above the 1,000 m level but suggest a shaft may be justified for deeper resources. The capital required to access Island Deep is likely to increase, particularly if exploration success below the 1,000m level continues. Richmont is currently trading at 9.2x 2017E EBITDA and 2.26x NAV compared to peers at 7.1x 2017E EBITDA and 1.71x NAV. These results support Richmont’s current valuation.

Company description: Richmont Mines Inc. (TSX:RIC, NYSE MKT:RIC) is a Canadian gold producer that has produced over 1.6 million ounces from its operations in Ontario, Newfoundland and Quebec. The company currently operates the Beaufor Mine in Quebec and produces gold from the Island Gold Mine in Ontario. 

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